Exercise 3-12 Allocation of transaction price and revenue recognition (LO3-3, LO3-4)

On November 1, 20X1, Gerakos Corporation sold software and a six-month tech sup. contract to a customer for $80,000. Gerakos sells the same software without tech sup for $60,000. It sells tech sup for $30,000. Gerakos allocates the transaction price based on relative stand-alone values.

Required:

What amount of revenue does Gerakos recognize in 20X1 and in 20X2? (Do not round intermediate calculations. Round your answers to the nearest whole dollar amount.)

Tried 66,667/ 13,333 wrong & 17,778/62,222 - both were wrong - calculations below for both

Total sales price = $80,000

Stand alone selling price of the software = $60,000

Selling price of the six-month = $80,000 - $60,000 = $20,000

In 2019, revenue to be recognized will include revenue from sale of software plus two months revenue from sale

In 2020, revenue to be recognized will include four months revenue from sale

Revenue recognized in 2019 = $60,000 + ($20,000 x 2/6) = $66,666.67

Revenue recognized in 2020 = $20,000 x 4/6 = $13,333.33

Here the amount of software and is bifurcated based on their individual prices

Software = 80000*60000/90000 = 53,333

Ts = 80000*30000/90000= 26667

The pending ts is for four months 26,667*4/6 = 17778

The revenue to be recognized in 2020 is 17778

The revenue to be recognized in 2019 is 80000-17778= 62222